Markets likely to make pessimistic start on Wednesday

Indian markets ended flat with negative bias on Tuesday as losses in banking and IT stocks overpowered gains in the metal and pharma space. Today, the start of session is likely to be pessimistic tracking weakness in global markets. There will be some cautiousness as India registered 11,795 fresh Covid-19 cases of the coronavirus disease (Covid-19). Active cases in India stand at 137,866, while the caseload tally has risen to 10,937,106. The country continues to be second-most-affected globally, and ranks 17th among worst-hit nations by active cases. However, some respite may come later in the day with ICRA ratings report that after two consecutive quarters of contraction, India's GDP is set to revert to the growth territory in the October-December 2020 period compared to the year-ago period. It said private consumption and government spending will help the economy post a turnaround during the December quarter and the GDP will grow 0.7 per cent. Meanwhile, the Reserve Bank of India (RBI) came out with the draft guidelines for allowing derivatives trading in the credit default swaps (CDS) in over-the-counter (OTC) markets and on recognised stock exchanges in the country. Traders may take note of report that India is poised to clear some new investment proposals from China in the coming weeks as frosty relations between the two neighbouring countries thawed amid an easing in border tensions. FMCG industry stocks will be in focus with a private report that the FMCG industry in India has recorded a value growth of 7.3 percent in October-December quarter helped by consumption-led recovery during the festive period and increase in sales from traditional as well as organised trade. There will be some reaction in NBFCs stocks with credit rating agency Crisil’s report that stressed assets of non-banking financial services companies (NBFCs) are expected to reach Rs 1.5-1.8 lakh crore, or 6.0-7.5 percent of the asset under management (AUM) by the end of the financial year 2021.

The US markets ended mostly lower on Tuesday as the expectation that US policymakers will stick with significant fiscal and monetary stimulus helped drive stocks higher while concerns over rising interest rates weighed on some sectors. Asian markets are trading mostly in red on Wednesday following muted trend on Wall Street overnight.

Back home, Indian equity benchmarks ended Tuesday's session slightly in red despite scaling record highs earlier in the day. Domestic equity markets began trading with gains taking support from the commerce ministry’s data showing that growing for the second consecutive month, the country's exports rose 6.16 per cent year-on-year to $27.45 billion in January 2021 following healthy growth in pharma and engineering sectors. Trade deficit during the month narrowed to $14.54 billion from $15.3 billion in January 2020. It was $15.44 billion in December 2020. Imports in January 2021 rose 2 per cent to $42 billion. Some support also came with a private report that economic activity is on the verge of normality after getting severely hit by COVID-19 and Indian GDP will grow at 13.5 per cent in FY22. Sentiments remained positive with India Ratings and Research in a report stated that the aggregate fiscal deficit of states is likely to be at 4.3 per cent of the gross domestic product (GDP) in 2021-22 compared to 4.6 per cent in 2020-21. The rating agency has revised the outlook on state finances to stable for FY22 from stable-to-negative. The benchmarks gave up all their gains in afternoon deals on account of a selling in private bank and IT stocks. However, losses remained capped as traders took some solace with S&P Global Ratings’ statement that India is on track for an economic recovery in the fiscal year ending March 2022. It said in a report titled Cross-Sector Outlook: India's Escape From Covid that consistently good agriculture performance, a flattening of the Covid-19 infection curve and a pickup in government spending are all supporting the economy. Separately, the Department of Expenditure under the Ministry of Finance has released the 16th weekly instalment of Rs 5,000 crore to the States on Monday to meet the Goods and Services Tax (GST) compensation shortfall. Finally, the BSE Sensex fell 49.96 points or 0.10% to 52,104.17, while the CNX Nifty was down by 1.25 points or 0.01% to 15,313.45.